Each month, NAGDCA turns the spotlight on one of our members to highlight the incredible work they’re doing to secure the retirement future of their public sector employees. Members are selected from our Leadership Award winners and spotlights are shared as a part of our ongoing Resource Digest series. 

Auto-Enrollment & Auto-Escalate to Boost Savings Rates

Q&A with San Mateo County
Meet the County & their Partners
Auto Enrollment Map

Implementing automatic plan features has gained popularity over the past several years as an effective way for plan sponsors to help improve retirement plan outcomes for participants. State laws prevent many plans from implementing some or all automatic features, but some plans have been able to adopt these provisions for their membership through partnership with labor-management organizations. As a positive outcome of this type of partnership, plans have reported substantial increases in participation and deferral rates.

In 2016, the San Mateo County Deferred Compensation Plan implemented automatic enrollment for new hires which resulted in plan participation rates increasing from 62% in January 2016 to 82% as of January 2019. Since the provision only applied to those hired after 2016, the County coordinated with key stakeholders to implement the same provision for current non-saving employees who work under three unrepresented groups and three collective bargaining agreements

The County acknowledged the new automatic enrollment provisions as a great first step and automatic escalation as the next step to helping employees reach their retirement goals. “Since 2016, the plan has been enrolling new participants at 1%. Though this is a great start, it is well below recommended savings rates. Financial experts generally recommend that people should save around 10% – 15% of salary to ensure financial security at and after retirement. With this in mind, we believed it was important to increase participant saving rates,” the County shared in their 2019 NAGDCA Leadership Award winning nomination.

In 2019, the County in partnership with their labor-management organizations were able to successfully implement an automatic escalation provision of 1% each year, up to a maximum of 5% for the same group of employees affected by the auto-enrollment provisions.

The County outlined the following benefits of the two new provisions:

  • 1,243 Employees Impacted

“Employees, across three collective bargaining units and three management groups, will be impacted by the new automatic enrollment and auto-escalate provisions in 2019.”

  • 90% of Employees will stay in the program

“Our current automatic enrollment program has a 10% opt-out rate; based on this, we project that approximately 90% of the County employees who are impacted by the new provisions will stay in the program.”

San Mateo County Plan Assets & Participants (as of 2/13/20):

  • 457 Plan – $543,129,851 with 8,706 participants
  • 457 OBRA – $9,440,894 with 3,594 participants
  • 401(a) Plan – $5,404,057 with 862 participants
  • 401(a) OBRA – $11,403,111 with 3,844 participants (frozen plan)

Plan Features:

  • Auto-enrollment
  • Auto-escalation
  • Employer match
  • Loans

San Mateo Project Leads:

  • Jay Castellano, Benefits Special Project Coordinator
  • Lisa Okada, Deputy Director of Human Resources
  • Kim Pearson, Benefits Manager
  • Iris Martinez, Benefits Technician
  • Marbella Dover, System Analyst

Industry Partners:

  • Bob Gleason, Relationship Manager, MassMutual
  • Caitlin Shipley, Communication Consultant, MassMutual
  • Paul Hackleman, Consultant, NFP
  • Bill Tugaw, Consultant, NFP
  • Estimated savings over five years: $1,561,000

“Our estimated additional savings into the County’s plan will be $312,000 during 2019, and an estimated $1,561,000 over the next five years (likely more as we continue contract negotiations and see more entities adopt these new provisions). To put this in context, the County’s Deferred Compensation Plan deposits an average of $1,162,000 on a bi-weekly basis and has approximately $488,000,000 in plan assets.”

Implementing the solutions was not without its challenges. California law currently prohibits automatic plan features for public sector employees, unless they are collectively bargained and agreed to during contract negotiations. To secure approval to implement the solutions, the County did an extensive amount of educating and negotiating with three collective bargaining units that currently make up the County’s workforce. To get support from the various entities in 2019, the County demonstrated the success of the adoption of auto-enrollment for new hires in 2016 and timed the implementation of the new provisions to align with employee cost of living increases. The County is still in negotiations with additional collective bargaining units with the hope of securing support for the new provisions for all County employees.

Looking forward, San Mateo County plans to focus on building awareness around investment strategies for current savers. The County shared, “We currently default employees into funds based on age, we will continue to educate and encourage employees to take an active role in their investment portfolios.”

Click here to learn more about San Mateo County’s Leadership Award winning work.
Click here to access a state-by-state view of auto enrollment and relevant state laws.

Q&A with San Mateo County

The most difficult aspect of these solutions was getting the buy-in from labor organizations. We were successful in this area because of the education to labor organizations regarding the importance of helping their members save for retirement. Providing education in a way that can be understood by staff at all levels was challenging. However, because we were able to explain that California Public Employees’ Pension Reform Act (PEPRA) placed limits on pension and we wanted to ensure that all employees and labor organizations understood that saving now to fill the pension gap is a very important undertaking for their membership so implementing policies around auto-enrollment and auto-escalate help move employees in this direction to help them down the road.

Open conversations with labor organization and getting their buy-in is essential along with developing good communication and access to training for their members.  We also implemented a phased approach starting with auto-enroll for new hires, auto-enroll for employee groups and auto escalation for employees groups. By offering training on how to opt out, labor organizations knew employees had choices in their retirement goals.

  • The communication was performed in stages. We placed this new provision in all MOU documents and board memos for our unrepresented employee groups.
  • We also sent communication prior to the auto enrollment and auto escalation task that occurred within our benefits admin system to ensure that employees were aware of this update.
  • We created a PowerPoint training that walked employees through the information and helped employee understand the opt-out options.

Meet San Mateo County & Industry Partners

Back Row (left to right): Bill Tugaw, NFP Consultant; Jay Castellano, Benefits Special Project Coordinator, County of San Mateo; Lisa Okada, Deputy Director of Human Resources, County of San Mateo; Cindy Rehmeier, MOSERS, 2019 NAGDCA President; Paul Hackleman, NFP Consultant; Robert Gleason Relationship Manager, MassMutual
Front row (left to right): Bridget Love, Deferred Compensation Committee Member; Lillibeth Dames, Deferred Compensation Committee Member; Laurel Finnegan, Deferred Compensation Committee Member; Robert Raw, Deferred Compensation Committee Member

NAGDCA Member Spotlights are developed as a part of our Resource Digest series. Each month we highlight a new topic and share relevant information and resources in our e-newsletter, NAGDCA Now, and in the News & Articles section of NAGDCA.org. Click below to view the February Resource Digest on Plan Features. 

Plan Features Resource Digest